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Last week was a crazy one for financial markets in general. Very few stocks gained value during a period when some investors were spooked by the extensive tariffs that the US administration placed on other countries. However, within the FTSE 100, some shares gained, with two in particular catching my eye.
Business still flowing
The first one was United Utilities Group (LSE:UU), which was the best-performing FTSE 100 name last week. It gained almost 5%, meaning the stock is up 1% over the last year.
There was no major business-specific news that came out, but rather, the rally speaks to where investors were reallocating their money. During uncertain times, utilities tend to outperform other sectors due to their defensive operations. For example, United Utilities primarily provides water and wastewater services in the North West of England. It has a proven business model of charging for these services within a fair regulatory framework.
So even if the tariffs damage the UK economy, people will still need water services. This should mean that the company’s revenue is unhindered by last week’s announcements. This can’t be said for all firms!
With a dividend yield of 4.79% and a track record of over a decade of continuous payments, the appeal of owning the stock for income during a volatile period also can’t be underestimated.
However, sewage leaks can cause reputational damage and fines. The company has recently been accused of illegally dumping waste in Lake Windermere. This situation needs to be monitored closely.
Captain of stormy seas
Admiral Group (LSE:ADM) rose by 2.5% last week and is now up 10% over the previous year. The insurance company primarily focuses on car and household protection, selling insurance straight to the public. It makes money from the premiums paid and other ancillary services.
Even though the group does have some small exposure to the US, it was reported last month that the company is looking to sell the US operations. Therefore, even though it might get slightly caught in the crosshairs of the evolving trade war, the vast majority of business is done in the UK.
Aside from that positive element, Admiral slots in again as a defensive stock. In my view, this was the main reason for the share price increasing last week. Insurance is a product that we all need, especially car insurance. Even if times get tough, I have to insure my vehicle. The impact on Admiral of any pending economic storm should be limited. This makes it appealing for investors at the moment.
Despite all the good points, investors need to be aware that Admiral is exposed to unexpected spikes in claims. Should we have a black swan event, extreme weather or other similar things, it could have to take a hit with payouts.
I think both stocks are worthy of consideration for an investor looking to find some defensive ideas to shelter from the market fall.
